Absorption Rate Pricing

Transcription

1 Absorption Rate Pricing By Zan Monroe The Monroe Company, Inc. PO Box Fayetteville NC,

2 Absorption Rate Pricing and Positioning Calculating Absorption Rate If 12 homes sold in the last 12 months, then the market is absorbing, on average, 1 house per month. If there are 10 homes currently on the market there is a 10 month supply. A 6 month supply is a balanced market, less than a 6 month supply is a seller s market and more than a 6 month supply is a buyer s market. To Calculate Absorption Rate search the MLS for the following: 1. Determine search area, house size, features, condition, price range and time of search. a. Detailed searches give more accurate results. b. Too much detail will eliminate huge segments of the market and give you false results 2. Find the number of closed properties during the time period in the search parameters defined in # 1 above. 3. The total number of houses closed divided by the number of months to find the average number of houses closed per month. 4. Determine the number of houses for sale today in your search parameters (# 1 above). 5. The number of houses for sale today divided by the average closed per month to determine the month s supply. A 6 month supply is a balanced market, less than 6 month supply is not enough houses to fill demand. More than a 6 months supply is not enough buyers to purchase the supply. 2

3 Absorption Rate Trend Analysis To determine the trends in a market, simply calculate the Absorption Rate over different time periods and see what the market changes are. I recommend using 12 months, 6 months and 3 months as your time periods. The longest periods give you the very best market averages. The shortest periods show you seasonality and latest market trends. 12 Months 6 Months 3 Months Enter # of Closed Transactions Average Homes Sold Per Month Currently Active in MLS Month s Supply of Houses Market FLOW Rate The Market FLOW Rate is the number of houses that FLOWED through the market over a given time period. Any house that was offered for sale during the time period, no matter what the outcome of that offering, became part of the market FLOW Rate. Here is a partial list of houses that are part of the FLOW Rate: Currently Active Currently Pending Closed over the time period Withdrawn over the time period Expired over the time period FLOW Rate of the Market Add all these house types together and you find the FLOW Rate of the market. 3

4 Odds of Selling There are only a certain number of houses that will sell in any given market, in any given price range, over any given period of time. Would you like to see the odds of your house being one of them? To calculate the Odds of Selling search your MLS to find the following: 1. Determine search area, house size, features, condition, price range and time of search. a. Detailed searches give more accurate results but too much detail will eliminate huge segments of the market and give you a false results b. Six months is the maximum search time to determine Odds of Selling. Longer search times create duplications in MLS data and give you a false result. 2. Find the number of closed properties during the time period in the search parameters defined in # 1 above. 3. Determine the FLOW Rate of the Market a. FLOW Rate of the Market is the number of houses that flowed through the market for sale in the time period. (see above) b. Actives +Pending + Closed + Expired + Withdrawn = Flow Rate 4. Divide the number closed in the time period by the flow rate over the same time period to determine the Odds of Selling (1) Number of closed transaction in months (2) Divided by FLOW Rate of Market in Months (3) Equals the Odds of Selling in Months % 4

5 Property Ranking Sheet Determine the House that is the Best Value Subject Property : Client: Date: Competing Property Location Size Features Condition Price Total Rank Rank each property on each of the five criteria in order from 1 to being the best. It is important to view and rank each house from the perspective of a buyer. As long as no other houses change their price and no new houses enter the market! If you would like to learn more Absorption Rate Pricing and Positioning is available today. $99 5

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